aerial-view-clouds-nasa-23781

GEMS shines amidst the murk

AAC Clyde Space 6 April 2020 Update
Download PDF

AAC Clyde Space

GEMS shines amidst the murk

Follow-on contract award

Aerospace & defence

6 April 2020

Price

SEK2.93

Market cap

SEK282m

SEK12.5/£

Net cash (SEKm) at 31 December 2019

51.6

Shares in issue

96.2m

Free float

77%

Code

AAC

Primary exchange

Nasdaq FN Premier

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(33.4)

(41.5)

(28.4)

Rel (local)

(17.9)

(24.5)

(18.0)

52-week high/low

SEK6.02

SEK2.64

Business description

Headquartered in Sweden, AAC Clyde Space is a world leader in nanosatellite end-to-end solutions, subsystems and platforms after merging with Clyde Space in Scotland. The merged company also supplies a range of technology components to other small satellite manufacturers globally.

Next events

Q120 results

May 2020

Analyst

Andy Chambers

+44 (0)20 3681 2525

AAC Clyde Space is a research client of Edison Investment Research Limited

While working under the operational adjustments required by COVID-19, it is pleasing to see continuing business development activity at AAC Clyde Space. The award of a follow-on SEK8m contract from Orbital Micro Systems for a 6U satellite is due to the success of a 3U in-orbit demonstrator deployed in July 2019. At present, disruption to operations at AAC Clyde has been limited and we maintain our forecasts, although welfare measures for employees could have some impact if they extend into H220.

Year end

Revenue SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/18

77.9

(38.0)

(0.49)

0.0

N/A

N/A

12/19

66.4

(38.7)

(0.45)

0.0

N/A

N/A

12/20e

129.8

(14.7)

(0.15)

0.0

N/A

N/A

12/21e

194.2

8.9

0.09

0.0

32.6

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

COVID-19 mitigation response

AAC Clyde Space implemented a plan on 13 March 2019 designed to mitigate the effects of COVID-19. The facilities in Glasgow and Sweden remain open and around 70% of staff are working from home using collaborative tools to progress engineering projects, provide services to customers and perform administrative tasks. The remainder are predominantly involved in manufacturing activities and these continue, although social distancing and other health and safety practices are being adhered to. The workflow through the main potential bottleneck these measures create, the clean room manufacturing space in Glasgow, is at a slower pace than will be required as projects mature in H220.

Business development continues

Travel has also been banned and client engagement is currently via electronic platforms. The award by Orbital Micro Systems (OMS) of a SEK8m contract for a 6U satellite on 2 April for its Global Environmental Monitoring Satellite (GEMS) programme indicates that commercial activity continues. The new satellite should be delivered next year with a payload from OMS designed to ultimately provide near real-time global weather monitoring using 3D passive microwave technology. The contract success follows from the in-orbit success of the 3U IOD-1 GEMS satellite that was backed by the UK Satellite Applications Catapult. The new direct contract transforms OMS’s proposed 48-satellite GEMS constellation into a commercial prospect with AAC Clyde well positioned to provide the platforms as they are progressively deployed over the next few years. The win also appears to be a further endorsement of AAC Clyde Space’s position in the New Space market.

Valuation: Positive FY21 EBITDA expected

The uncertainty caused by COVID-19 is unlikely to dissipate quickly, but at present management has adapted operations to execute the growth plan as well as possible, with a positive EBITDA still targeted for FY21.

Exhibit 1: Financial summary

SEKm

2018

2019

2020e

2021e

Year end December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Net sales

 

 

77.9

66.4

129.8

194.2

Own work capitalised and other operating income

11.3

14.1

4.9

4.0

Group income

89.2

80.6

134.7

198.2

EBITDA

 

 

(28.5)

(27.3)

(1.2)

26.0

Operating Profit (before amortisation and except).

(30.8)

(32.7)

(7.3)

18.7

Intangible Amortisation

(6.9)

(5.1)

(7.5)

(9.8)

Exceptionals

(5.2)

(2.4)

(2.4)

(1.9)

Other

0.0

0.0

0.0

0.0

Operating Profit

(42.9)

(40.2)

(17.1)

7.0

Net Interest

(0.3)

(0.8)

0.1

0.0

Profit Before Tax (norm)

 

 

(38.0)

(38.7)

(14.7)

8.9

Profit Before Tax (FRS 3)

 

 

(43.3)

(41.0)

(17.1)

7.0

Tax

0.9

0.5

0.9

(0.4)

Profit After Tax (norm)

(37.2)

(38.2)

(14.0)

8.5

Profit After Tax (FRS 3)

(42.3)

(40.6)

(16.2)

6.7

Average Number of Shares Outstanding (m)

75.4

84.8

96.2

96.2

EPS - fully diluted (SEK)

 

 

(0.49)

(0.45)

(0.15)

0.09

EPS - normalised (SEK)

 

 

(0.49)

(0.45)

(0.15)

0.09

EPS - (IFRS) (SEK)

 

 

(0.56)

(0.48)

(0.17)

0.07

Dividend per share (SEK)

0.0

0.0

0.0

0.0

EBITDA Margin (%)

-36.6

-41.1

-0.9

13.4

Operating Margin (before GW and except.) (%)

-39.6

-49.2

-5.6

9.6

BALANCE SHEET

Fixed Assets

 

 

396.8

436.9

435.1

431.9

Intangible Assets

392.6

418.6

421.7

423.8

Tangible Assets

4.2

4.1

1.9

(1.0)

Right of use asset

14.2

11.6

9.1

Investments

0.0

0.0

0.0

0.0

Current Assets

 

 

56.2

108.5

89.6

87.8

Stocks

6.5

13.1

22.7

27.2

Debtors

10.1

17.7

26.0

29.1

Cash

12.2

52.4

26.4

32.4

Other

27.3

25.2

28.6

29.1

Current Liabilities

 

 

(35.6)

(60.5)

(72.7)

(79.3)

Creditors

(35.5)

(60.5)

(72.7)

(79.3)

Short term borrowings

(0.2)

0.0

0.0

0.0

Long Term Liabilities

 

 

(2.4)

(16.0)

0.6

19.0

Long term borrowings

(1.2)

(0.8)

(0.8)

(0.9)

Lease liabilities

(14.1)

(11.6)

(9.0)

Other long term liabilities

(1.2)

(1.1)

(1.1)

(1.1)

Net Assets

 

 

415.0

468.9

452.7

459.4

CASH FLOW

Operating Cash Flow

 

 

(49.1)

(16.2)

(12.6)

22.0

Net Interest

(0.3)

(0.8)

0.1

0.0

Tax

0.8

0.4

0.7

(0.4)

Capex

(2.3)

(13.1)

(14.2)

(15.7)

Acquisitions/disposals

(377.4)

(2.8)

0.0

0.0

Financing

404.6

73.3

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

Net Cash Flow

(23.6)

40.8

(25.9)

5.9

Opening net debt/(cash) excluding lease liabilities

(35.2)

(10.9)

(51.6)

(25.7)

HP finance leases initiated

0.0

0.0

0.0

0.0

Other

(0.7)

(0.1)

0.0

0.0

Closing net debt/(cash) excluding lease liabilities

(10.9)

(51.6)

(25.7)

(31.5)

Net financial liabilities including lease liabilities

 

(37.5)

(14.1)

(22.5)

Source: Company reports; Edison Investment Research estimates


General disclaimer and copyright

This report has been commissioned by AAC Clyde Space and prepared and issued by Edison, in consideration of a fee payable by AAC Clyde Space. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by AAC Clyde Space and prepared and issued by Edison, in consideration of a fee payable by AAC Clyde Space. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues